Question 1

If at a price of $24,Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,the demand for her orchids is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit-elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic. 
C)  unit-elastic. 
D)  perfectly elastic.

Question 2

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Accepted Answer

A)  0.17 
B)  0.62 
C)  1.62 
D)  5 
A)  0.17 
B)  0.62 
C)  1.62 
D)  5

Question 3

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Accepted Answer

A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices.

Question 4

A service station owner in Staten Island,New York,was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price.If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline,the demand for gasoline is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly inelastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly inelastic.

Question 5

Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold.In October 2004,the price averaged $2.15 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months,use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.

Accepted Answer

Price elasticity of demand = [(14 - 15)/

Question 6

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

A) True 
 B)False

Question 7

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is heavily endorsed by dentists. 
D)  There are few close substitutes for toothpaste. 
A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is heavily endorsed by dentists. 
D)  There are few close substitutes for toothpaste.

Question 8

The price of wheat has fallen since 1950.Which of the following explains this price decline?

Accepted Answer

A)  The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low. 
B)  The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low. 
C)  The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good. 
D)  The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1. 
A)  The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low. 
B)  The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low. 
C)  The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good. 
D)  The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1.

Question 9

If the market for a product is broadly defined,then

Accepted Answer

A)  the good has many complements. 
B)  there are few substitutes for the product and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget. 
A)  the good has many complements. 
B)  there are few substitutes for the product and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget.

Question 10

If demand is inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A)  one. 
B)  less than one. 
C)  greater than one. 
D)  greater than the absolute value of the slope of the demand curve. 
A)  one. 
B)  less than one. 
C)  greater than one. 
D)  greater than the absolute value of the slope of the demand curve.

Question 11

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.

Accepted Answer

A)  hot beverages, coffee, Peets' Coffee 
B)  Peets' Coffee, coffee, hot beverages 
C)  coffee, Peets' Coffee, hot beverages 
D)  coffee, hot beverages, Peets' Coffee 
A)  hot beverages, coffee, Peets' Coffee 
B)  Peets' Coffee, coffee, hot beverages 
C)  coffee, Peets' Coffee, hot beverages 
D)  coffee, hot beverages, Peets' Coffee

Question 12

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

Accepted Answer

A)  The more elastic the supply curve, the greater the price increase. 
B)  The more elastic the supply curve, the smaller the price decrease. 
C)  The increase in price is not affected by the elasticity of the supply curve. 
D)  The decrease in price will always be proportional to the magnitude of the demand shift. 
A)  The more elastic the supply curve, the greater the price increase. 
B)  The more elastic the supply curve, the smaller the price decrease. 
C)  The increase in price is not affected by the elasticity of the supply curve. 
D)  The decrease in price will always be proportional to the magnitude of the demand shift.

Question 13

At a price of $100,Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125,9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals,using the midpoint formula.

Accepted Answer

A)  2 
B)  1.25 
C)  0.9 
D)  0.75 
A)  2 
B)  1.25 
C)  0.9 
D)  0.75

Question 14

Table 6-1
  
-Refer to Table 6-1.Over what range of prices is the demand inelastic?

Accepted Answer

A)  over the entire range of prices 
B)  between $12 and $16 
C)  between $8 and $16 
D)  between $2 and $8 
A)  over the entire range of prices 
B)  between $12 and $16 
C)  between $8 and $16 
D)  between $2 and $8

Question 15

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Accepted Answer

A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change but total revenue decreases. 
A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change but total revenue decreases.

Question 16

Suppose the value of the price elasticity of supply is 4.What does this mean?

Accepted Answer

A)  A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. 
B)  A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. 
C)  A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. 
D)  For every $1 increase in price, quantity supplied increases by 4 units. 
A)  A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. 
B)  A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. 
C)  A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. 
D)  For every $1 increase in price, quantity supplied increases by 4 units.

Question 17

Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

Accepted Answer

The first total revenue is ($5

Question 18

Cross-price elasticity of demand is calculated as the

Accepted Answer

A)  percentage change in quantity demanded divided by percentage change in price of a good. 
B)  percentage change in quantity demanded of one good divided by percentage change in price of a different good. 
C)  percentage change in quantity sold divided by percentage change in buyers' incomes. 
D)  percentage change in quantity supplied divided by percentage change in price of a good. 
A)  percentage change in quantity demanded divided by percentage change in price of a good. 
B)  percentage change in quantity demanded of one good divided by percentage change in price of a different good. 
C)  percentage change in quantity sold divided by percentage change in buyers' incomes. 
D)  percentage change in quantity supplied divided by percentage change in price of a good.

Question 19

If firms do not increase their quantity supplied when price changes,then supply is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  relatively inelastic. 
D)  elastic. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  relatively inelastic. 
D)  elastic.

Question 20

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Accepted Answer

A)  The decrease in supply led to huge price increases. 
B)  Tomatoes are necessities. 
C)  The demand for tomatoes is price inelastic. 
D)  The cross-price elasticity between tomatoes and most other substitute vegetables is very low. 
A)  The decrease in supply led to huge price increases. 
B)  Tomatoes are necessities. 
C)  The demand for tomatoes is price inelastic. 
D)  The cross-price elasticity between tomatoes and most other substitute vegetables is very low.

Exam 6: Elasticity: The Responsiveness of Demand and Supply

If at a price of $24,Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,the demand for her orchids is

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

The price of wheat has fallen since 1950.Which of the following explains this price decline?

If the market for a product is broadly defined,then

If demand is inelastic,the absolute value of the price elasticity of demand is

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

At a price of $100,Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125,9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals,using the midpoint formula.

Table 6-1 -Refer to Table 6-1.Over what range of prices is the demand inelastic?

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Suppose the value of the price elasticity of supply is 4.What does this mean?

Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

Cross-price elasticity of demand is calculated as the

If firms do not increase their quantity supplied when price changes,then supply is

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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